All Forum Posts by: Tom Lafferty

@Mason Keith , thats what I've been seeing.  20-25% down, including rehab money.  I went to a Marcus & Millichap multifamily conference last week where they had a panel of lenders speaking.  Sounded like things are starting to loosen up.  One thing they mentioned that might be interesting to you was a FNMA small balance product, or something like that.  It may have been the Freddie Mac person that mentioned it, I'm not sure, but might be worth looking into.  Also mentioned a FNMA 12 year note as opposed to their usual 10.  Seems like some of the banks are starting to offer non-recourse too....

Smaller properties cost more to manage.  The 32 unit we have now would run anywhere from 8-10% for management, where a 100 unit would likely be close to 3.5-4% (at least thats what I've found here).  I've found a few companies that will manage for 6%, but its "off site" with no on site personnel, and with large leasing fees for each new lease written.  In addition, occupancy is much more affected by a few vacant units much more than a larger property.

I am currently looking for 80+ unit properties where I live in DFW.  With high demand and low supply I've started researching other areas.  The problem is that my only experience is a 32 unit apartment of which I am the asset manager.  I feel that I'd be able to effectively manage a management company at this point, but I'm looking for input on how properties go bad with non-local ownership.  I have dozens of friends locally (DFW) who have bought underperforming properties from out of state owners, and don't want to repeat their mistakes.  The story on a lot of them is that someone from another state (sorry-its usually CA!) bought it as an investment (at the wrong price) and completely ignored it.  

I'm able to effectively analyze a property, and would certainly go and learn an area before making offers.  Is it enough to think I can look at monthly reports, stay in contact with the PM company, visit once or twice a year, and expect the property to do well?  Since I'm generating my own reports on the 32 unit, I think I have a good handle on what to watch for in the financials.  It is very encouraging to see how many of you do this successfully, and buy all over the country!  I just want to make sure I'm not crazy to look at doing the same thing after only 1 deal.   My initial thought was to look within 3-4 hours of DFW, but that doesn't offer much, and I'm not sure that would really be so different from buying something 12 hours away when it really came down to it.  At least I could fly there in a few hours!

Any insight would be greatly appreciated!

@Bradley Benski , I sent you a PM...

Uh oh-- this is right by 87 and 73, but it is just south of 73.  

I just used the term economic loss to include vacancy, bad debt, loss to lease, etc.  

the sponsors have provided quite a bit of information, and more is coming; I just like to do my own research and get multiple opinions.  In other words, OVER-analyze everything!

thanks for the input!  This will be a completely hands off, passive investment for me. I will not be sponsoring the deal and will have no involvement with the management company.  I really just need to get a handle on whether it's realistic to take an apt complex that is 65% full (low numbers due to recent full rehab) and then maintain about 85% economic loss for the next five years.  Here in dfw that's almost too conservative, but Port A?  I just don't know.  I've seen the projections that show a net loss in population, but I'm wondering if that already takes into account the LNG projects?  

If anyone has had multifamily experience there, I'd love to hear your thoughts!

I'm looking at investing in an apartment complex in Port Arthur, and am looking for good info on the MF market there.  I like all the numbers for the property, and the projections look conservative-- based on my DFW knowledge.  For all I know, the economic loss numbers that I think look really conservative might be unrealistic for that area.  

I'm trying to get down there in the next week or so to check it out, but if anyone has any experience or knowledge of the market I'd greatly appreciate any input.  I know unemployment is a little high, and its dependent on the oil/gas industry.  Supposedly there will also be some LNG export facilities going in, but I don't know if the data I'm seeing already includes that.  

Specifically, I'd like to know if there are a lot of multifamily properties there, and if occupancy is an issue.  

Thanks for any input you may have.

We bought a 32 unit in the DFW area Feb of 2014 at about an 8 cap. Projection for investors was 10-12% cash on cash, with a 100% return after sale at 5 years. After 4 months of operation, and a better idea of where rents can go, we're looking at 13-16% cash on cash, and an IRR after 5 years of around 22%.

Same thing here though, everything I'm interested in won't allow me to keep projections conservative if I want to compete. 

Lots of good information already, so I'm not sure what I can add, but you asked for personal experience and how we started, so I'll give you my two cents...

I started with a 32 unit apartment complex with 7 other investors and myself as the deal sponsor.  I am self-managing (no management company), but have leasing and maintenance staff on site.  Things are going very well, but it has been a learning experience!  I studied, researched, interviewed other owners, studied, studied, and studied some more for almost a year before making the offer, and still learn new things every day.

I would absolutely NOT start the same way without someone who was VERY experienced guiding me.  There are just far too many ways to get in trouble.  I know people who have done it, but I would never have attempted it.  Analyzing the deals without a lot of study/experience is too dangerous.  I can't tell you how many properties I looked at that I thought were great deals, only to run it by experienced people who showed me why it was exactly the opposite.  Beyond that, knowing what kind of rehab is worth the money, knowing the market, leasing knowledge (laws/sales/customer service, etc), and any number of other things could immediately sink you.   

Now what others have said is also very true -- bigger is easier.  If I had found an 80-100 unit, the property could better support a professional management company that takes all of the above items out of my hands.  I chose to start with the 32 and self manage so that when I do buy the next one, I'll be much better equipped to manage the management company. 

The last thing I'll mention, and its already been said, is that getting an offer accepted on an 80-100 unit property as a first timer is going to be difficult unless you have extremely strong financials.

I know all those things sound contradictory, but thats been my experience.  Hopefully at least something was helpful! 

Rats! I only work one day this week and it's TUESDAY!! That's right by the recent apartment purchase too!!